Hong Kong Web3 wants to wear the crown, how can banks bear the burden of compliance?
Original Author: Bi Lianghuan
Original Author: Bi Lianghuan
Recently, virtual asset trading platforms have faced difficulties in opening bank accounts in Hong Kong, which has caused continuous exchanges between the Hong Kong Monetary Authority HKMA and banks. What concerns do banks have? The financial industry chooses banks as one of the important gatekeepers to prevent financial crimes including money laundering risks, but they cannot use traditional anti-money laundering methods to deal with the money laundering risks brought by new technologies. The risk of money laundering cannot be underestimated. According to statistics from the United Nations, the amount of money laundered globally has reached 800 billion to 2 trillion U.S. dollars every year, accounting for about 2% to 5% of GDP. In 2022 alone, financial institutions worldwide will be fined more than $8 billion for anti-money laundering-related violations.
first level title
text
image description
Source: OKG Research
text
According to the guidelines of the Hong Kong government, all walks of life are also proceeding cautiously under the compliance framework. Hong Kong's banking regulator said on June 15 that it had asked banks operating in the region in April to try to meet the business needs of licensed virtual asset trading platforms, Reuters reported. The early development of this business is relatively slow. One of the reasons is that virtual assets and blockchain technology have the characteristics of anonymity and decentralization. Web3 supervision and compliance will be more complicated. Moreover, funds in the Web3 field are no longer transferred through bank accounts, but between addresses on the chain. Some applications such as coin mixers and anonymous wallets will increase the concealment of transactions. Therefore, traditional AML regulations and measures will be invalid in Web3. The methods that have been used for many years are not effective in the face of new technology, which makes some organizations daunted.
first level title
Okey Cloud Chain Onchain AML handed over such an answer sheet
How does Web3 comply with regulations and seamlessly connect with the wider market? How can traditional financial institutions legally incorporate new businesses or even try new business models? In the "empty window period" of compliance, is there a mature new solution to replace the old method? Okey Cloud Chain Holdings (01499.HK) handed over a RegTech answer sheet summarizing years of practical experience at the Greenwich Economic Forum in Hong Kong. Not only Web3 needs compliance technology, RegTech is also widely used in financial technology. According to Yahoo Finance, the RegTech market is expected to reach $28.83 billion by 2029 from $6.5 billion in 2022.
image description
Source: AML Regtech: Network Analysis, Hong Kong Monetary Authority, 9 May 2023
Zhang Chao, vice president of Okey Cloud Chain Group and executive director of Okey Cloud Chain Holdings (1499.HK), said at the Greenwich Economic Forum, "Compliance is not cost, but value. A good compliance technology solution can help Enterprises in the new digital era create sustainable value and maintain a competitive advantage." Especially in a macro environment full of uncertainties and technological upgrades, "compliance technology can enable fast-growing new technology companies, especially high-growth companies. Adapting to this ever-adjusting regulatory environment will allow companies to stay in the chess game of new industries for a long time and enjoy the benefits of the wind."
In this report "AML Regtech: Network Analytics" published by the Hong Kong Monetary Authority in May 2023, it is also stated that banks engage external vendors because of the lack of internal technical skills to develop internal network analysis capabilities and the desire to pass External industry knowledge and experience accelerates the adoption of web analytics. Banks must consider the vendor's experience implementing web analytics in specific areas such as AML/CFT, as well as the technical maturity of their solutions in a potentially fragmented data environment. As the OKLink Onchain AML technology solution that supports the most public chains in the world, its core competitiveness lies in its data capabilities. For example, it has accumulated more than 3 billion address tag libraries, which requires not only AI, big data and other technologies And the analysis of the expert team requires the team to be immersed in the industry and accumulate labels for many years.
For virtual assets and the Web3 industry, the core of compliance and anti-money laundering efforts is to establish reliable KYC (know your customer) and KYT (know your transaction) procedures, more precisely KYA (know your address) and KYT. This can not only help virtual asset trading platforms or other virtual asset service providers verify the identity and background information of customers, but also help them monitor trading activities to identify and prevent suspicious transactions and capital flows. KYT and KYA are not a "one-off deal", but a matter of continuous monitoring during the customer transaction cycle. From the perspective of efficiency, compliance technology will greatly simplify the process and improve efficiency in this cycle. "Especially for small banks, they can use compliance technology solutions to achieve very beneficial results without incurring high costs or having to recruit a large number of data scientists." Zhu Liqiao, executive director of the Hong Kong Monetary Authority, in 2022 Said at the Asian Fraud and Financial Crime Conference.
secondary title
text
With the continuous development of technological means, financial crimes will become more and more complex, and the demand for compliance technology will also increase. OKLink's compliance business and combating financial crime business have already launched operations, and relying on the parent company OKLink Group to focus on the research and application of blockchain technology in a long-distance running marathon, knowing that compliance is the driving force of the industry The key to real development. In this answer sheet submitted to Hong Kong Web3, Okey Cloud Chain has proved to the market the other side that compliance technology can reach with practical actions and mature products. For companies or projects in new industries, compliance is not only a harmonious symbiosis of legal compliance and commercial profitability, but also one of the important criteria for partners or counterparties to evaluate each other's business reputation. It is reflected in the financial statements of each enterprise, and it is also the embodiment of the value of enterprise assets; then for the industry, compliance technology can also improve the production efficiency of the industry through automation and other technical means, and assist the relevant departments of the regulatory agency to manage the automatically generated Report and detect risks for early warning.
Not only the Web3 industry, but also the financial technology industry, the wave of human technological innovation will come to us at a faster speed with unknown risks, and compliance technology will build the first dam for every company in the industry. In the spirit of openness and sharing, discuss with the industry and regulatory agencies the regulatory framework and compliance regulations that are conducive to industrial development, and develop and implement compliance technology products based on solid technology and rich data. This is the way for traditional financial institutions to open the Web3 market. The key to the door.
